Published: Wed, March 07, 2018
Tech | By Tabitha Holland

Qualcomm takeover battle intervention shows U.S. security panel's expanding reach

Qualcomm takeover battle intervention shows U.S. security panel's expanding reach

A source familiar with CFIUS' thinking said that if the deal was completed, the USA military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice".

However, the pre-deal discussions by CFIUS - which are extremely rare - suggest Broadcom's plans to move its headquarters may not be enough to sidestep a national security review that could threaten the deal.

Qualcomm's shareholder vote will now be delayed at least a month as the Committee on Foreign Investment in the USA investigates Broadcom's proposed deal. Broadcom has nominated six directors to Qualcomm's board in its effort to purchase the company, and a Monday report from Bloomberg News said that shareholders were backing Broadcom's nominees in early voting. In the letter, Cornyn also noted Qualcomm's significant role in the development of 5G technologies and that the United States is competing against China in this field.

As noted by The Wall Street Journal, the surprise move signals concerns among US government officials that a Broadcom acquisition of Qualcomm could raise national security issues and potentially affect the United States' role in the development of 5G network technology as China works to take a lead in the space.

Before announcing its first bid for Qualcomm, Broadcom had announced that it would begin the corporate redomiciling process to the United States after having been moved from there in 2015.

CFIUS' intervention was unusual in that the panel typically reviews signed deals.

The involvement of CFIUS marks a major blow to the deal.

Qualcomm's shares fell 4 percent in trading before the bell.

"This can only be seen as an intentional lack of disclosure, both to Broadcom and to its own stockholders". Despite those issues, Qualcomm officials have met with Broadcom executives and last month kept open the possibility of continued talks over price and other concerns.

Broadcom most recently offered $79 per share, or $117 billion, for Qualcomm, lowering its previous bid of $82 per share, or $121 billion, after Qualcomm raised its own takeover bid for NXP Semiconductors.

Trump praised the move at the time, calling Broadcom "one of the really great, great companies". "Upon completion of the redomiciliation, Broadcom's proposed acquisition of Qualcomm will not be a CFIUS covered transaction".

On Monday, Broadcom was informed on Sunday that Qualcomm had secretly filed a request with the Committee on Foreign Investments in the United States (CFIUS) to launch an investigation resulting in a delay of Qualcomm's annual meeting, which was filed back in late January. "Qualcomm now has their excuse to postpone their critical vote, giving them some breathing room to work on its acquisition of NXP Semiconductors NV, attempt to make progress on their Apple Inc licensing issues, and attempt to build a stronger case for shareholders", said Bernstein analyst Stacy Rasgon.

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